Chinese Oil Major To Explore Iraqi Field

China’s CNOOC has inked a deal for exploration at an oil field in central Iraq, the company in a statement on Wednesday.

The deposit, Block 7, will be managed by a fully owned subsidiary of the Chinese company, CNOOC Africa Holding, with the first phase of the work planned to take three years, Reuters reported.

The deal follows CNOOC’s winning bid for Block 7 following a tender that the Iraqi government carried out earlier this year, where Chinese energy majors were the big winners, winning a total of four bids for nine oil and gas deposits.

Chinese companies’ entry into Iraq’s oil and gas sector is a result of an agreement inked back in 2019 and dubbed “Oil for Reconstruction and Investment”, under which Chinese companies are granted entry into Iraq’s energy infrastructure sector as investors in return for oil supplies.

In addition to this agreement, Iraq’s government sought to stimulate more foreign investment in its oil and gas resources by changing the mechanism used to share profits from exploration and production activities.

Previously, Iraq offered foreign energy investors a technical service contract, which paid a flat fixed rate to the producing companies for every barrel they extracted.

This was considered sub-optimal by the producers since it meant that they could not make more money when oil prices went higher and at the same time had to shoulder any upward changes in production costs.

Since this led to a pullout by some supermajors, Iraq decided to offer those still in the country and potential new entrants a profit-sharing agreement mechanism that did not feature the above problems with costs and market price advantages.

It was this change in contract terms that convinced TotalEnergies to sign a massive $27-billion deal with the Iraqi authorities for the development of the country’s natural gas reserves, as well as solar power capacity.

Source: https://energynewsafrica.com